Iceland's Baugur Group HF has confirmed it is in talks with the board of House of Fraser PLC with a view to exploring the possibility of making a cash offer for the company. In a statement, the company said discussions are at an early stage and that there can be no certainty that an offer would be forthcoming.

Baugur's statement followed comments from its chief executive, Jon Asgeir Janannesson, in today's Daily Telegraph in which he suggested a formal offer for the British department store could be made within weeks.

Seymour Pierce said it expects an indicative offer from the Icelandic group of around 150 pence per share to be announced very soon, subject to the completion of due diligence. The broker thinks the vast majority of House of Fraser's shareholders would 'readily accept' 150 pence.

However, KBC Peel Hunt told investors it continues to believe that a bid is by no means guaranteed. The broker said it has calculated a take-out value for House of Fraser at 135 pence per share -- around a 17 pct premium to the pre-bid share price levels, but well short of the 150 pence that the board are thought to want.

Accounting for the group's Barclaycard agreement, KBC Peel Hunt said it arrives at a take-out value of 145 pence. House of Fraser shares closed up 6-3/4 at 132-1/4.

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